Cebu Pacific gets $250-M fresh ammunition to withstand crisis

The Gokongwei family’s Cebu Pacific sealed a $250-million (P12 billion) investment from the International Finance Corp. (IFC) and aviation-focused Indigo Partners, bringing in new partners and money to combat the COVID-19 crisis.

The deal extends efforts by the budget carrier to boost financial resources as steep losses continued in the first quarter of 2021.

The investment by IFC, the IFC Emerging Asia Fund and Indigo Philippines LLC was made through the sale of bonds that can be converted to common shares of operator Cebu Air Inc. at P38 apiece by 2027.

The deal provides Cebu Pacific with “longer liquidity runway to help the company withstand the effects of the pandemic until economic activity and travel demand recovers.”

“This will further strengthen CEB as we recover, so we may continue fulfilling our commitment to improve the lives of people in the communities we serve for a long time to come,” Cebu Pacific president and CEO Lance Gokongwei said in a statement on Monday.

Indigo Partners managing partner Bill Franke said the investment was in anticipation of “growth opportunities ahead as travel demand increases postpandemic.”

“We have a great deal of respect for what the Gokongwei family has achieved with the airline, and we look forward to a strong partnership,” Franke said in the same statement.

Cebu Pacific is fortifying its balance sheet as flyers pushed back travel plans amid COVID-19 restrictions, confusing travel regulations and the slow rollout of vaccines.

In its latest quarterly report, Cebu Air saw losses from January to March this year balloon over 500 percent to P7.28 billion against the same period in 2020, when the industry was beginning to feel the impact of the pandemic.

Passenger revenues dropped by over 90 percent to P887.4 million while flights were carrying barely half their capacity with an average seat load factor of 53.2 percent.

Total revenues dropped 83 percent to P15.91 billion compared to the same period in 2020.

The carrier recorded 500,000 flyers from January to March this year versus 4.4 million last year while the average ticket cost fell 37.5 percent to P1,612.

More profitable cargo flights helped offset weak sales as revenues here rose 30.3 percent to P1.32 billion during the quarter.

Cebu Air raised funds from shareholders last March to the tune of P12.5 billion from the sale of convertible preferred shares.

This boosted the company’s cash and its equivalents by over 250 percent to P15.34 billion compared to the start of the year. It also signed a P16-billion term loan facility from local banks.

Cebu Air has yet to withdraw those funds as of March 31, its quarterly filing showed.